No, you cannot claim an education credit on Form 8863 for college tuition and fees paid with a tax-free scholarship. According to the retrieved information, specifically from the IRS Form Instruction titled "1040 (2023)" and the statute "§ 25A. American Opportunity and Lifetime Learning credits," any expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer, cannot be used to claim an education credit. This includes amounts that are excludable from gross income under section 117, which pertains to qualified scholarships.
Furthermore, the IRS Publication 970 (2023) also clarifies that you cannot claim an American opportunity credit based on qualified education expenses paid with tax-free educational assistance. This means that if the tuition and fees are covered by a tax-free scholarship, those amounts are not eligible for the education credit.
Therefore, if your college tuition and fees are paid with a tax-free scholarship, you are not eligible to claim an education credit on Form 8863 for those payments.
Sources:
Publication 970 (2023)
Instructions for Form 1040-NR (2023)
1040 (2023)
§ 25A. American Opportunity and Lifetime Learning credits
Instructions for Form 8867 (11/2023)
Instructions for Form 1040-NR-EZ (2019)
Instructions for Form 8863 (2023)
